Thursday's upward 2.1 per cent revaluation of the yuan and the adoption of a managed float against a basket of currencies, sets the stage for a meaningful appreciation of Asian currencies. JPMorgan forecasts the yuan will rise a cumulative 7 per cent by the year's end, to trade at 7.8 yuan against the US dollar. A further 8 per cent appreciation is forecast next year.

Most economists believe last week's move by Beijing is a starting point for yuan appreciation of around 5 per cent or more annually. Historically, countries with strong annual gross domestic product growth rates between 7 and 8 per cent could expect their currencies to appreciate 30 to 70 per cent during a 10-year period, said Deutsche Bank.

If these revaluation trends hold, Hong Kong will be in the reverse perfect-storm scenario, saddled with a chronically weak currency, booming economic growth and red-hot asset markets.

'It simply means Hong Kong is more competitive relative to the region, which implies larger current-account balances, rising asset prices, all the sorts of things you associate with a booming economy,' Mr Simpfendorfer said.

Among the beneficiaries geared to the local rebound are conglomerates such as Cheung Kong (Holdings), Sun Hung Kai Properties, New World Development and Hang Lung Group.

Consensus analyst opinion is that rising capital inflows will limit interest rates, while mainland cash will spill across the border in search of hard assets. Macquarie raised its 12-month price target on Cheung Kong to $98.80, a 17 per cent premium to its present level.

Mr Simpfendorfer is less certain revaluation spells good news for Asia, but he says it should help balance the global economy by realigning the region towards domestic consumption and away from export-led growth. 'I don't think it signals a bull market,' he said of the region, but he does expect a short-term rally. Strapped with a faltering currency, Hong Kong was the only market in a genuine bull, he said.

Macquarie regional economist Bill Belchere is more upbeat, believing the revaluation signals the return of region-wide asset-price reflation. 'It sets in motion the great Asian reflation which was stalling and sputtering over the last quarter,' he said. 'I think they [China] set off a bull market that could last for quite a while.'

On Friday, Macquarie boosted its year-end target for the Hang Seng Index from 15,500 to 17,550, about 20 per cent above current levels. At the target level the market would be priced at 15.3 times 2006 earnings and a 3.4 per cent yield, according to the bank's forecasts.

Although interest rates were rising, Mr Belchere said it would have little effect on the strong yuan demand, with China's current account balance running a surplus equivalent to 6 per cent of GDP. 'What this points to is a continuing demand to appreciate the currency,' he said. 'This means yield curves across Asia remain below the US yield curve and that is to some extent stimulative.'

The domino effect of rising currencies across Asia will lead to further flows into the region as speculators bet on a continuation of the trend. Malaysia, Korea, Hong Kong and perhaps Japan would receive most of the hot money. 'Singapore stands to benefit a lot,' Mr Belchere said. 'Hong Kong is like a balloon, there is a huge impact here.'

He also believes the global manufacturing cycle will rebound, adding to the bottom line in Hong Kong's export and logistics leveraged economy. Recent data supports this view, and Japan, Asia ex-Japan, and even Europe were clearly on the mend, while strong US jobs growth and rising income levels point to an upturn, he said.

'There are a lot of indicators we are going to get a bit of a lift here as we move towards the end of the year,' he said. 'Rather than a global economy that is falling apart, it has been incredibly resilient.'

Macquarie forecasts the Hong Kong dollar will decline 3.4 per cent next year on an export weighted basis. The depreciation is a boon to regionally focused goods and services, and especially positive for the high-income job market.

Other winners were companies with large holdings of yuan-denominated assets, including Hopewell Highway, Kerry Properties, and Keppel Land, Macquarie said.

Hong Kong banks could also benefit from the decline in inter-bank borrowing rates when speculative dollar flows return.

Looking at the impact of the revaluation on the mainland, ABN Amro recommends investors head for companies with strong earnings growth and debt denominated in foreign currencies. Among favourites are fixed-line telecoms, toll-road operators, and retailers.

Airlines, power utilities, breweries and refineries are likely beneficiaries.